Enterprising Rural

This newsletter is an instrument of An Online Newsletter July, 2006 Volume II, Issue 7
the Enterprising Rural Families:
Making It Work program of the What Is A Family Business Charter and
University of Wyoming Cooperative Why Would A Family Business Need One?
Extension Service. For further in-
formation concerning the Enter- Every business, re- Overlapping Systems and Human Resources
prising Rural Families program or gardless of size, re-
quires definite sys-
on-line course contact informa-
tems and rules to
tion@eRuralFamilies.org or go to
abide by. This allows Family Values Business Values

http://eRuralFamilies.org/. for consistency in Recruitment: Recruitment:

operation, freedom Provide opportunities to Hire only those individu-
relatives I need als who are most compe-
TIP OF THE MONTH: of expression with- (particularly if they are tent.
out fear, and top your children).
TEN REASONS BUINESSES SUCCEED Remuneration:
managerial perform- Remuneration: Allocate salaries/benefits
• The experience and skills of the top ance. For best re- Allocate “allowances” in in accordance with mar-
accordance with devel- ket worth and perform-
managers. sults, these should opmental needs. The ance history.
Founder:
be developed with What to do? Appraisal:
Appraisal:
• The energy, persistence and resource- the contribution of Do not differentiate Differentiate between
fulness (the will to make the business all team members. between siblings. Re- employees to identify the
succeed) of the top managers. gard individuals as high performers. Regard
“ends” rather than individuals more as
The often competing “means.” “means” rather than
• A product that is at least a cut above and conflicting fam- “ends.”
the competition and service that doesn’t Training:
ily and business val- Provide learning oppor- Training:
get in the way of people buying.
ues comprising a tunities designed to Provide learning opportu-
satisfy the individual’s
nities designed to satisfy
• The ability to create a “buzz” around family business sys- developmental needs. organizational needs.
the product with aggressive and strate- tem creates the need
gic marketing. for a method of com-
municating between
• Deal-making skills to sell the product these systems. Formal documents describing the way business will be con-
at the highest possible price given your
ducted and how family members and other employees will interact in that busi-
market.
ness can help.
• The ability to keep developing new
products to retain and build a customer
Written policies should be developed to cover: Mission Statement, Business
base. Charter, and Code of Conduct. Written procedures are required for such areas
as: Hiring, Discipline, Dealing with Conflict, Upgrading of team skills, Orienta-
• Deal-making skills to work with re- tion, Meetings, Teamwork, and Accountability.
source suppliers to keep costs low.
Mission Statement
• The maturity to treat employees, sup-
pliers and partners fairly and respect- Mission statements typically contain three parts:
fully.
Vision – The purpose of the business. Where and what it will be in the fu-
• Superior location and/or promotion ture.
creating a connection between your
product and where it can be obtained. Business definition – The product produced, services rendered, customers
sought, and geographic area.
• A steady source of business during
both good economic times and down- Values— Desired attitudes and behavior that direct your business; attitude
turns. you will carry out through policy, programs, procedures, personnel selection. It
clearly shows “what is important to the team.”
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EXAMPLE Assign team members the task of individually coming up with what they think would be a
good Mission Statement. Later, come together as a group, consider everyone’s ideas and de-
MISSION
velop one statement from them.
STATEMENT
Family Farm Business Charter
We are dedicated to
A family business should have a Family Business Charter which outlines the goals and expec-
the production of a
tations of the family for the business and each other. This charter will allow all family mem-
quality product
bers to express their vision for the future. This should be set up with the assistance of an out-
through reflective side party to help to bring some objectivity to the process.
human resource
management to en- A Family Charter is a decision-making tool that sets out the values that are important
sure the highest to the family and the rules for resolving problems in a united and peaceful way. It is
level of safety and not intended to be a legal document (as is a Shareholders' Agreement), but a reference
satisfaction for our point that clearly sets out the criteria for the goals, management philosophy, share
customers and sus- ownership, working relationships, family relationships, and succession of the family
tainable employ- business.
ment for our em- The key to avoiding serious conflict is to involve family members in the process of cre-
ployees. ating a family business charter. Set aside the time to discuss the components and get
consensus. Refer to the charter often to clarify direction and resolve conflict.
OR
Reassess the charter every couple of years and make adjustments to reflect any impor-
To achieve the tant internal and external changes.1
highest customer
satisfaction through The business charter outlines guiding principles for family membership in the family business.
producing top qual- With such guidelines, conflicts arising from differing value systems, expectations and overlap-
ity products within ping roles between family and business can be minimized. Consistent application of these
guidelines brings clarity to production and peace to the team.
a system of soundly
managed Some of the points a charter should contain include:
employees.
●Who will be hired? A charter should spell out whether some or all family members will be
hired. Policies relating to eligibility of spouses, in-laws and cousins should be formulated. In
all cases, people should be hired for their ability to contribute to the business not because of their family connection.

●What criteria will be used to determine eligibility? Guidelines should state the age, education and experience required.
Some families believe that on-the-job training is sufficient. Others see the advantage of having family members exposed
to other experiences. Whatever the preference, expectations need to be spelled out.

●Is there a job opening? Family members should be brought in to do a job that clearly serves the purposes of the busi-
ness. Creating a meaningless job just because a family member wants to work in the business can lead to resentment
among other employees and the erosion of the family member's self-esteem.

●Who will supervise? Having one family member supervise another can be difficult. New family members should be su-
pervised, if possible, by a non-family employee. This facilitates better training and more honest feedback.

●How will the employee be held accountable? Once in the business, is a family member assured of continued employment
no matter what? It's far better to have in place a system of performance appraisal and compensation commensurate with
fair market value.

Family members:

√ Must meet the same criteria for job requirements and level of performance as non-family members.
√ Are required to have training and experience prior to being considered for permanent employment.
√ Will be compensated only at fair market value.
√ Must complete the normal application form for positions available, and will be considered the same as other applicants.
√ Must complete ** hours of approved continuing education each year.

(** set through team discussion and based on policy decision)

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Code of Conduct

The Code of Conduct is a written statement that clearly points out what is important in conduct-
Example Code of Conduct
ing business affairs. It reminds members of their commitment to and interaction with each
other. In addition, it reaffirms what is important in conducting family business affairs, both EMPLOYEES
within the team and with others outside the business. It must be designed to suit a family’s spe- MUST
cific needs and situation. The code is not meant to be a list of "Thou shalts" and "Thou shalt
nots." It is intended to reaffirm what's important in conducting family business affairs and re- Conduct them-
mind members of their commitment to each other.
selves in a profes-
Codes of conduct differ from one family business to another. Each should be designed to suit the sional manner ap-
individual family's needs and situation - but they tend to have features in common. Here are propriate to the
some of the issues that might be addressed in a family code of conduct: work environment
The need to respect each other Maintain a
The need to treat each other fairly pleasant atmosphere
The relative importance of family harmony and loyalty (some may see this as being para- for customers and
mount; others may not) other staff
The relation of the family to the business. An example might be "What is good for the com- Be courteous,
pany is good for the family" friendly and coop-
The need for open, professional communication erative
The need to keep family differences out of the business Show respect
The right of family members to speak up and express themselves
and understanding
to consumer
Guidelines for handling conflict
Exhibit open and
Policies on substance abuse and safety
honest communica-
This list is not exhaustive. Many other topics could be addressed in a code of conduct according
tion
to what suits a particular family. What is important is that the code be understood and accepted
by all members. Treat each other
fairly
Develop your Code of Conduct during a meeting of all family team members. You must also seek Respect each
input from your non-family employees as well. other in word and
In addition to the mission statement, business charter and code of conduct, written procedures action
for other dimensions of family business can help the business function more smoothly. Other areas
to consider include such areas as: Hiring, Discipline, Dealing with Conflict, Upgrading Team Skills, Orientation, Meet-
ings, Teamwork, and Accountability.
(Developing written policies, including a family business charter, and procedures for operating a family business are cov-
ered in greater detail in the Enterprising Rural Families: Making It WorkTM on-line course.)
Edited by: John P. Hewlett, UW Ranch/Farm Management Specialist.

Reprinted from Managing the Multi-Generational Family Farm, Canadian Farm Business Management Council, 1997 and A Guide for Developing Best Practices For
Farming with Family, Canadian Farm Business Management Council, 2003.
“Overlapping Systems and Human Resources” diagram taken from Guide to Family Business, Canadian Edition, 2003.

1 “The Family Communication Program,” The Success Care Program, http://www.successcare.com

A family business should have written polices developed to cover:

√ Mission Statement
√ Business Charter
√ Code of Conduct
Written procedures are required for such areas as:
√ Hiring
√ Discipline
√ Dealing with Conflict
√ Upgrading of team skills
√ Orientation
√ Meetings
√ Teamwork and Accountability.
TM
Enterprising Rural Families
July, 2006 Volume II, Issue 7